Is behavioural economics a political placebo?

The New York Times has an opinion piece arguing that the rise of behavioural economics has led to the science being championed by politicians who want a soft option to avoid marking hard political decisions.

The authors are economist George Loewenstein and behavioural scientist Peter Ubel who list a range of behavioural economics-inspired policies which they claim have been used to give the impression of substantive action when the most effective form of behaviour change happens through painful tax and regulation.

Our over-reliance on behavioral economics is not limited to health care. A ‚Äúgallons-per-mile‚Äù bill recently passed by the New York State Senate is intended to help drivers think more clearly about the fuel consumption of the vehicles they purchase; research has shown that gallons-per-mile is a more effective means of getting drivers to appreciate the realities of fuel consumption than the traditional miles-per-gallon.

But more and better information fails to get at the core of the problem: people drive large, energy-inefficient cars because gas is still relatively cheap. An increase in the gas tax that made the price of gas reflect its true costs would be a far more effective ‚Äî though much more politically painful ‚Äî way to reduce fuel consumption.

For example, the price of alcohol has been found to reliably influence national levels of death from liver disease, drink-driving levels and violent crime but politicians in many countries are loath to raise taxes.

This is not to say that raising taxes is always the preferred option, but the NYT piece raises some uncomfortable points for policy-makers who claimed to be ‘coming down hard’ on certain behaviours while avoiding the most effective solutions.

It’s probably also important to note that they authors don’t dismiss behavioural economics, just that it should complement and not replace other forms of policy-making.